Why Stocks in the Bitcoin Universe Soared In October

The Bitcoin (BTC -0.12%) cryptocurrency rose 10.2% in October 2024, according to data from S&P Global Market Intelligence. As a result, stocks and funds with strong attachments to the largest crypto also soared, often much quicker. For example, these names in the Bitcoin world posted strong price gains last month. I’m including Bitcoin itself and a popular S&P 500 (^GSPC -0.28%) index fund for your convenience:

Data collected from YCharts, FinViz, and CoinMarketCap on 11/4/2024.

Bitcoin’s October rally (and related price jumps)

Bitcoin itself experienced two distinct growth spurts in October 2024. First, investors embraced the Chinese government‘s latest economic stimulus plan, which could boost demand for Bitcoin and other cryptocurrencies. Near the end of the month, many investors were in a speculative mood and drove prices higher for plenty of high-risk investments — Bitcoin included. The speculative spurt was inspired by recent interest rate cuts and the upcoming presidential election.

The iShares Bitcoin ETF followed suit with Bitcoin’s price moves, as spot-price funds are designed to do.

Riot Platforms’ stock soared as much as 46.5% higher in late October but took a sharp price cut in the last two days. The stock tends to amplify whatever Bitcoin’s chart is doing. Positive moves are boosted by the company’s active investment in mining more digital coins. Downturns make a deeper mark on Riot since those investments add risk to the business model. The price drop at the end of the month sprung from the company’s third-quarter earnings report, which fell short of analyst estimates across the board. The spring’s halving of Bitcoin’s mining rewards has slashed Riot’s profit margins and added financial pressure to its operations.

And then, there’s MicroStrategy. The specialist in enterprise-class data analytics software has become a very direct Bitcoin investment after converting most of its cash reserves into Bitcoin holdings, and adding more Bitcoin by a variety of financing channels. This stock skyrocketed 53.2% higher before turning back down on October 30. The company reported third-quarter results with underwhelming sales and earnings, but also expanded its Bitcoin-buying program dramatically. MicroStrategy plans to raise $42 billion of capital over the next three years by raising debt and selling stock, investing the proceeds in more Bitcoin along the way. The stock often rises when MicroStrategy’s leaders present new Bitcoin-buying plans, but this particular announcement was too audacious to inspire market optimism.

Putting the October surge into perspective

Viewing the returns of these Bitcoin-based investments for the full year — starting with the introduction of spot Bitcoin ETFs on January 10 — underscores the risky yet promising nature of investing in crypto. MicroStrategy is soaring, Riot Platforms has plunged, and the more straightforward Bitcoin assets are outperforming the stock market in 2024:

MSTR data by YCharts

Crypto investors are still waiting for the positive Bitcoin price moves that tend to follow after each halving of its mining rewards. Institutional investors and other whales are nibbling on the new exchange-traded funds (ETFs) but the largest ETF only accounts for 0.04% of Bitcoin’s total market value today.

So if you agree with the Bitcoin bulls and expect the digital currency to change the world someday, it’s not too late to set up investments to take advantage of the incoming price surge. Otherwise, you can join master investor Warren Buffett on the sidelines, watching the cryptocurrency drama with no skin in the game. Either way, this newfangled asset class is never boring.